Binance appears to be suffering from decreased liquidity. A report from cryptocurrency analytics firm Nansen indicates that Binance has had net withdrawals of more than $3.6 billion from December 7-13.
Binance’s gross withdrawals have been around $8.8 billion, while gross deposits have been around $5.1 billion.
Binance Netflow 7D ($) -3,660,311,347
8,783,380,428 – Outflow
5,123,069,081 – Inflow
Exchange Flows dashboard â¤µï¸ https://t.co/CYrBQLryQ0 pic.twitter.com/vV6vcqoWKK
—Nansen (@nansen_ai) December 13, 2022
In addition, daily net deposits of Ethereum ERC-20 tokens on Binance were over $2 billion a day last November, but withdrawals of over $1 billion have been invested between December 12-13.
According to Andrew Thurman, According to Nansen’s technical, the drop in liquidity may have been due in part to the exit of large market makers from the exchange. Thurman’s research suggested that wintermute withdrew more than USD 300 million between December 11 and 12 and Jump Finance turned over $30 million in Binance USD (BUSD) between December 12-13.
Binance is the world’s largest cryptocurrency exchange by volume, but came under pressure Dec. 12 when a news story claimed that the US Department of Justice is considering charging its executives with financial crimes. The Department of Justice has not issued an official statement on the matter, but Binance has claimed that the report is “wrong.”
Reuters has it wrong again.
Now they’re attacking our incredible law enforcement team. A team that we’re incredibly proud of – they’ve made crypto more secure for all of us.
Here’s the full statement we sent the reporter and a blog about our remarkable law enforcement team.
—Binance (@binance) December 12, 2022
In response to the withdrawals, Binance CEO, Changpeng Zhao, has affirmed that the event can be good for the platform, as it will serve as a “stress test” that will show that Binance is solvent, stating:
We saw some withdrawals today (net $1.14b ish). We have seen this before. Some days we have net withdrawals; some days we have net deposits. Business as usual for us.
I actually think it is a good idea to “stress test withdrawals” on each CEX on a rotating basis.
— CZ Binance (@cz_binance) December 13, 2022
However, despite this positive attitude, Binance’s own educational resources state that low liquidity can lead to widening bid-ask spreads and increased slippage, factors that can be negative for clients.
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